analysts meeting presentation roberto rossi
TRANSCRIPT
11
Logistics StrategyRoberto Rossi
22
Agenda
• Introduction and overview
• Strategy
• Diagnostics
33
Representing TNT Logistics
Alsopresent
Presenters
Name Responsibility
• Roberto Rossi
• Neil Crossthwaite
• Fausto Forti
• Pierre Girardin
• Dave Kulik
• Keith Goldsmith
• Managing Director
• UK & Ireland
• Italy and South America
• France
• North America
• IT North America
• Keith Nichols
• Joris Kaak
• Menno Groeneweg
• Finance Director Logistics
• Senior Manager Logistics
• Manager Marketing & Strategy
Years ofexperiencein Logistics
28
24
25
12
28
13
44
TNT Logistics Mission
To lead the global logistics industry in designing, implementing and
operating solutions to manage complex supply chains, and exploiting
technology to achieve optimisation, integration and visibility
throughout the process
55
TNT Logistics spans the entire supply chain
Execution/Physical operations
• Milk runs• Cross-docking• Consolidation &
warehousing• Kitting & value added
services• Freight management• Inventory planning &
control
• Work in Progresswarehousing
• Work in Progresstransportation
• Sub-assembly• Assembly fitting• Inventory planning
& control
• DistributionResource Planning
• Warehousing• Inventory planning &
control• Value added services• Distribution via
dedicated & sharednetworks
• Cross-docking• Track & Trace• Freight management
• Returns logistics• Recycle logistics• Spare parts
distribution• Coordination &
management of repairactivities
Procurementand
Inbound
Customer Service
ManufacturingProcess
Outboundand
Distribution
Integration and visibility through technology
Strategy,design &
optimisationof the supply
chain
Geographies & Sectors
66
Global footprint
The AmericasEUR 0.8 bn
EuropeEUR 2.2 bn
Asia PacificEUR 0.1 bn
TNT Logistics Global Revenue 2001 EUR 3.1 billion
TNT Logistics presence
77
Rapid growth
TNT Logistics Revenues 1999 - 2002(Billion Euro)
1999 2000 2001 2002
1.5
2.2
3.13.4CAGR 30%
Note: 2002 full year based on analyst consensus estimate
• Operating in 35 countries
• More than 1,150 contracts
88
Rapid growth
Average of top 10 players
TNT Logistics
Annual revenues (Billion Euro)
1997 1998 1999 2000 2001
1.00.9
1.21.0
1.5 1.5
1.8
2.1
1.8
3.1
99
TNT - Top Logistics player
3.7
3.1
2.2
2.1
1.5
1.4
1.4
1.2
1.2
1.2
Exel Logistics
TNT Logistics
Tibbett & Britten
Ryder Logistics
Deutsche Post Logistics
Hays Logistics
UPS Logistics
Christian Salvesen
P&O Trans European
Wincanton
Global Logistics Providers Ranking(Year 2001, Euro Bn.)
Source: Annual reports (web sites)
1010
3%
4%
5%
6%
7%
1996 1997 1998 1999 2000 2001 2002June
TNT
Average of 8 top players
Margins under pressure
Note: Players included: Hays, TDG, Tibbett & Britten, Wincanton, Christian Salvesen, TNT, Ryder, ExelSources: Annual reports; websites, press articles, investor reports,
Market Leader EBITA Margins1996 - 2002
1111
Action plan in place for margin protection
Cost reduction
Operational efficiency
Business Developmentefficiency
Initiative Steps taken
Impact onmargin
expectedin 2003 of
0.3 to0.5%
• Freight procurement• Portfolio management• Non-freight procurement
• Central support teamsin place to facilitateimplementation
• Operations best practice• Sector specific
benchmarking• Overhead
• Implementation pilotsstarted
• Key AccountManagement
• Shared networks
• In progress for top 20accounts
• Will be discussed incase studies
1212
Agenda
• Introduction and overview
• Strategy
• Diagnostics
1313
Logistics Strategy
• Consistentgeographicalfootprint
• Freightforwardingcapabilities
• Sector centersof excellence
• Key accountmanagement
Shared globalIT system
Requirements Outcome
• Leadingworldwidelogisticsprovider
• Aboveindustryaveragegrowth ratesand margins
Aspirations
• Provide new andadditional services
• Reduce costs andoptimize servicelevels
Penetrationof focuschains
Manage restof portfoliofor margin
1414
Aspirations
RequirementsAspirations OutcomeRequirements
Requirements
Requirements
1515
Become the Network Innovator
Networkinnovator
• Global footprint• Superiorre-engineeringskills
• State of the artIT solutions
• Solid sectorexpertise
• Additionalservices
• Key AccountManagement
• Operationalexcellence
• Sharednetworks
• Reduce costs byreconfiguringsector networks
Low cost vs.competition
High value tocustomers
3. Manageand design
changes in thesupply chain
2. Improveservice levels
1. Costeffectivelogisticssolutions
• Implementingbest practices inTNT
• Cost reductions
1616
RequirementsAspirations OutcomeRequirements
Requirements
Requirements
Requirements
1717
First focus areas already selected
US
E U
AmbientChilledFrozenSpareparts
Out-bound
In-bound
TyresSpareparts
In-bound
FMCG/RetailElectronicsAutomotive
Auto-motivesparepartsUS
TyresUS
Auto-motivespareparts
Europe
TyresEurope
Consumerelectro-
nicsoutboundEurope
Computingspareparts
Europe
Auto-motiveinbound
US
Auto-motiveinboundEurope
FMCGchilledEurope
FMCGambientEurope
Discussed later today in case studies
1818
Required actions to meet strategic aspirations
Freightforwardingcapabilities
Other whitespots
Germanywhite spot
• Required capability in some geographies andsectors
• Entry options are under consideration
• Germany is largest Logistics market in Europe• Substantial progress made with integration of
In-Night operations
• Korea and Japan important markets inautomotive and electronics
• Sector driven acquisitions for footprintcalibration
Rationale
1919
Sector centers of excellence implemented
Center of excellence
Responsibilities of sector centersAuto spares EU
Auto inbound US
Tyres EU, US
Computingspares EU
Consumerelectronics EU
IT UK NL F US
Retain country P&L
• Shared automotive spare partsnetwork in Europe
• Shared automotive inboundnetwork in North America
• Shared electronics spare partsnetwork EMEA
Specific initiatives
•P&L or pro-forma P&L•Operate network•Manage key accounts•Benchmark and share bestpractices
2020
Shared global IT platform in development
• IT solutions oftendedicated percontract
• Competency centersin place -- Lyra, Clickand Matrix
• Matrix is anintegrated solution
• Easy interfacingfor clients
• end-to-endvisibility
Current situation Competitive advantagesPilot
Customersolution A
Customersolution B
Customersolution C
Shared global platform
Enterprise application integration
• Configurebusinessprocesses rapidly(weeks)
TMSWMS Visibilitysystems
Other
Library
Customer process
• Library ofstandardizedcomponents
Ware-housing
Trans-portation
Tracking …
2121
Outcome
• Leadingworldwidelogisticsprovider
• Aboveindustryaveragegrowth ratesand margins
RequirementsAspirations Requirements
Requirements
Requirements
2222
Strategy enables above average growth and margins
Any newTNT
offeringcould bematched
Competitiveparity
SustainableSustainablecompetitivecompetitiveadvantageadvantage
Barriers tocompete
with TNTHigh
Network innovator
• Global footprint
• Superiorre-engineering skills
• State of the art ITsolutions
• Solid sectorexpertise
• Additional services
• Key AccountManagement
• Operationalexcellence
• Roll out ofsharednetworks
• Reconfiguringsectornetworks
• Implementingbest practices
• Ongoing costreductions
Low/medium
Medium
High
2323
Example - Newsfast
Low cost
High value
Distinctive3 PL
Soundvalue
Network innovator
Re-designed road basednetwork for NewsInternational
Improvedservice to99.8%
Increased density byadding new newspapersand magazines
Developed web-basedvisibility
Added last remainingnewspapers Integrate with Taylor
Barnard operations
6
Service to 99.8%
5
4
3
21
2424
Elephant hunting
2525
Key messages
TNT Logistics has:
• Solid growth with attractive margins
• Action plan in place to deal with current tough economicconditions
• Clear strategy and roadmap to create a sustainable competitiveposition
• Clear focus on specific industry chains and large clients
• Operational excellence and continuous management of risks ascore elements of our management principles
• Highly experienced management team
2626
Agenda
• Introduction and overview
• Strategy
• Diagnostics
2727
55%
45%
71%
15%
14%
Overall split by physical activity 2001
Split by activity
Split by dedicated versus sharedrevenue • Taylor Barnard (UK)
• Newsfast (UK)• Italy non-Automotive• Barlatier (France)• Schrader (Germany)• Mendy (France)
Warehousing & added value
Distribution
Shared distributionShared warehousing
Dedicated
Main shared activities:
2828
Sector split
InitiativesRevenue split by sector
•Targeted acquisitions in non-automotive, such as Nicolas
•Additional resources inBusiness Developmentallocated to non-automotive
Dependence onAutomotive is
decreasing
Other
Hi-tech ElectronicsPublishing MediaFMCG
Tyres
Automotive
2000 2001 2002YTD
13%
11%
10%
16%
13%
7%
42%
6%7%
46%
19%
11%
7%
38%
6%
16%13%19%
2929
Automotive
Split by activity
Split by geography
• 65 vehicle manufacturers and equipmentmanufacturers
• > 200 contracts in place
• Significant contract wins 2002:– BMW, North America– American Honda– International Engines, South America– Valeo, France
54%
39%
7%
Inbound
Outbound
Other
60%
36%
4%
Europe
Americas
Asia Pacific
3030
Split by activity
Split by geography
FMCG
• 89 retail chains in food, drink and consumergoods
• 19 clothing companies
• > 200 contracts in place
• Significant contract wins 2002:• Carrefour, France (multiple contracts)• L’Oreal, France• Johnson & Johnson, Turkey• Migros, Turkey• Gardena, Nordics• Starbucks, UK
84%
50%
50%
Europe
Transport
Warehousing
11% Americas5% Asia Pacific
3131
Split by activity
Split by geography
Electronics
• > 100 customers in the High Techindustry
• > 150 contracts in place
• Significant contract wins 2002:– Wind, Italy– Hagemeyer, UK– Bosch / Siemens, Brazil– Embraco, Brazil– Xerox, Brazil
61%
26%
Outbound
Spare parts & repair
13% Inbound
8%2%
AmericasAsia Pacific
90% Europe
3232
Automotive FMCG
Top 5 accounts by sector(in alphabetical order)
Electronics
3333
Contract risk management
• Comprehensive set of Guidelines to minimise risks andprotect financial returns
• Policy must be followed in all contracts and any exceptionsto the Guidelines must be approved by TNT LogisticsDivisional Head Office
• No acceptance of product liability• Liability for loss, damage and theft of Goods limited• Insurance
• Termination by customer for convenience withcompensation
– Redundancy Costs of personnel– Ongoing Lease Commitments of property & equipment– Unamortised assets
Commercialpolicy
Limitation of liability exposure
Compensation for termination
3434
Volume protection is achievedvia various measures
• Open Book Cost Plus contracts 20% of TNT Logistics’revenue -- mostly UK and Asia
• All other contracts are tariff based
• Sliding Scales for tariff adjustments• Fixed Cost components• Re-negotiation of contract when significant change in
volumes or profiles
Pricingstructure
Protection forvolume fluctuations
3535
Duration of contracts
• Average life of new contracts won in 2001 and 2002 is 3.5 years
• Existing contracts with a fixed renewal date have 3 years remainingon average
• Rolling contracts without a fixed end date have an average age of 6years
• Larger contracts have a longer duration to minimise risks for bothparties
• TNT’s hit rate upon renewal of contracts is very high at 83%
3636
End of presentation